Bangladesh's Non-Banking Financial Institutions Asked To Raise Paid Up Capital By 2010

November 4, 2009 10:34 a.m. EST

Dhaka, Bangladesh (AHN) - The central bank of Bangladesh has asked the non-banking financial institutions (NBFIs) to raise their paid up capital minimum $7.23 million (BDT 500 million) by the end of 2010, officials told AHN Media.

"We've taken the latest move to consolidate the capital base of the country's NBFIs in line with the Basel-II framework that would come into effect from 2011," a senior official of the Bangladesh Bank (BB), the country's central bank, told AHN in the capital, Dhaka.

The NBFIs have been asked to meet the required capital by increasing its reserve or issuing rights shares or floating initial public offerings (IPOs). But no NBFI will be allowed to offer cash dividends so long there is capital deficit, according to a central bank circular, issued on Wednesday.

Besides, the NBFIs have an option for merging to meet the capital requirement within the stipulated time-frame, the BB suggested.

Currently, 29 NBFIs are running their business across the country.

The central bank of Bangladesh is expected to implement the Basel-II framework for NBFIs from 2011 in keeping with the global standard, the BB officials added.

Under the Basel-II, the minimum capital requirement and the risk weighted assets for the NBFIs will be fixed considering the overall performance of the sector, they added.

The Basel-II accord came into effect in Bangladesh for the commercial banks from January this year alongside the Basel-I to consolidate capital base of the banks.

The new Basel accord has been prepared on the basis of three pillars: minimum capital requirement, supervisory review process and market discipline.

Three types of risks -- credit risk, market risk and operational risk -- have to be considered under the minimum capital requirement.